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Lessons from a Community Fundraising Project

Intro

Brian Proffitt and Don Parris served as auditors of the campaign, and offer our financial report to the community, along with a few observations aimed at helping anyone else who might endeavor to launch an initiative requiring serious fundraising efforts. Overall, the Tux500 team performed reasonably well and acted transparently. A few simple, but important improvements will serve this team – and other community fundraising projects – well in their next endeavor. While the project may have seemed a bit hasty to some, it was actually well planned and executed.

The Financial Results

As auditors, Brian and I monitored the Paypal and merchandise accounts throughout the project. We logged in daily to check that the balances in the accounts matched those listed on the Tux500 website. We even ensured that the Tux500 website showed only the amount cleared, and not the pending transactions. We communicated via e-mail about, and received fax confirmations of, the wire transfer from Acceleration Marketing to Chastain Motorsports. Brian offers further details below.

The Tux500 project sought to raise between $25,000 and $350,000 to sponsor the Chastain Motorsports car in the Indy 500. The project raised $18,308.90 via Paypal, including $249.72 raised through merchandise sales. Tux500 paid out $300.00 to the artist who created the actual logo for the race car. $17,759.18 was disbursed to Chastain Motorsports. The remaining $249.72 will be distributed to Chastain upon receipt from the merchandising vendor. Despite failing to meet the ultimate, or even the minimum, funding goal, Tom Chastain chose to honor the community's
efforts and sport the Tux logo on his car anyway. The Tux logo was placed on the #77 car's nose cone and near the air intake. The Tux logo was on display at various locations in the maintenance area.

The project managed to produce a promotional video, filmed at the track, aimed at potential supporters. Several major news outlets carried stories about Tux500, not to speak of news outlets that span a range of markets from autos to computers in the Americas, Asia, Australia, and Europe. Additionally, the Tux500 campaign was discussed in numerous blogs and online forums by literally thousands of people.

Importance of Auditor Independence

A critical factor in any sort of fundraiser is fiscal accountability. People who donate their money to a specific cause want to know that their money actually gets to that cause. To handle this task, auditors are needed.

The role of the auditor, on paper, is simple: examine the funds that come in and make sure that money is properly distributed to the appropriate accounts. In a private venture, professional auditors can be hired. In a community-based venture where funding is limited, volunteers will be needed.

We found as we worked on this project that the most important aspect of our job was to make ourselves as available as we could so that when questions were asked about the financial workings of the fundraising, we could answer those questions in a timely manner. This is actually an area that we felt could be improved, because as criticisms about the legitimacy of the project were raised, not one person contacted Brian about the project at all. Don was contacted by both reporters and critics of the program, but those questions were more about the broader scope of the project (“was it a good idea,” etc.)--not the specific financial detail that was our task to validate. This, to us, was telling about the motivations of the critics, since specific facts about financial transactions didn't seem to be a priority.

The role of the auditor is not to advocate the project they are monitoring, or even speak for it. As journalists, both Don and Brian took careful steps to maintain public disclosure about their involvement with the Tux500 Project. We also held back from answering specific criticisms about the project, unless they were directed as questions to us. We both made this position of neutrality quite clear to the Tux500 organizers before the start of the fundraising.

If we were to recommend good characteristics for an auditor, we would not immediately recommend journalists. This may seem surprising, given our own profession. The problem is that, while there are many journalists who have enough credibility within the community to maintain a neutral and trustworthy stance, fundraisers immediately lose access to something else that's just as important: the potential advocacy or neutral coverage from the journalist now in the role of auditor. Small community-based projects need all the publicity they can get, and there were many times we felt our hands were tied because we could not apply the full resources of our publications to help the Tux500 Project. To do so would have either compromised our roles as auditors or as journalists.

Instead, organizers of fundraising projects might want to seek out known individuals in the community that have credibility and a neutral interest in the project at hand.

Knowing the Whole Plan

While the Tux500 project stated the general plan fairly clearly on the website, we found two areas where improvements could be made. Although we were advised the project would sell merchandise as part of the effort, the Tux500 team had named REVELinux/Spreadshirt and possibly Cafe Press as vendors. In the end, REVELinux/Spreadshirt and Zazzle were used to sell merchandise.

Additionally, the auditors were not given access to monitor the accounts prior to the merchandising effort being announced. Brian was the first to express concern, and the project organizers immediately provided the auditors with full access to monitor the additional accounts. There was a one-day lapse in timing, and no funds had been transferred during that time. Our concerns were thus alleviated quickly.

As auditors, we both felt that the Tux500 project could have made some details a little more clear. For example, it was not very clear from the outset at what point the project would be deemed a failure, or what would happen if the project did fail. Although these questions were addressed in published news articles, they should also have been spelled out in detail on the Tux500 website. In order to maintain transparency, it is important that projects provide the auditors with a detailed plan in the beginning and to inform them of decisions and variations along the way, preferably in advance of implementing new steps.

Adjusting to Changes

Despite all of the up-front planning, there could be times when changes to a project may have to be made. As mentioned in the previous section, this was true of the Tux500 Project. Another change in the project's plan occurred when project organizers made a decision to extend the fundraising for sponsorship an additional few days, after the Chastain Motorsports car officially qualified in the Indianapolis 500. This affected the logistics of the project greatly, because by the time the fundraising was closed, Tom Chastain and the rest of his team were far too busy with immediate race preparations to take the time to accept the transfer of funds from the Tux500 Project.

At this point, it became crucial for all parties to be involved in discussion the new plan, which was to start the transfer process from the Tux500 PayPal accounts (which usually takes three business days) to Acceleration Marketing after the race. Once the funds were in AM's accounts (which was confirmed to us by AM's bank and PayPal), the funds would then be wired to Chastain Motorsports, which was done on June 5 and confirmed by Don and Brian on June 8 and 11, respectively. Ultimately, the result of this new plan—getting the funds to Chastain Motorsports, the owners of the Tux race car—was no different than the original plan of getting the funds to Chastain before the race. Only the timing of events changed.

Still, it was very important that transparency was maintained at all times, which it was. If you face a similar issue in your project, be sure to include the auditors and make sure they are crystal clear on how and why things are changing.

Conclusion

Raising funds for any type of project is not an easy endeavor, even in a community surrounding Linux and open source. But as open source becomes increasingly popular, the opportunity for constructive or even fun projects will arise more frequently.

No matter what your goal is, maintain as much clarity and transparency about your goal and your methods to the community at large and to your third-party monitors. If you do so, you will hopefully be able to come back again to the community the next time around with a reputation of being honest and forthright.